Stocks Fall as Gold Climbs With Swiss Franc on Election Anxiety

  • Mexico peso slumps after U.S. poll shows Trump edging ahead
  • Asian index futures signal losses from Japan to Australia

Chinese PMI Picks up but Outflows Weigh on the Yuan

Stocks dropped to their lowest point since July, while gold rose with the Swiss franc amid heightened anxiety a week before the U.S. election.

Equities joined a selloff in riskier assets after a poll showed Republican candidate Donald Trump ahead of Democrat Hillary Clinton in the presidential race. Mexico’s peso, which is seen as a barometer for market perceptions on the vote, drove losses among the world’s major currencies. Meanwhile, Switzerland’s franc and the Japanese yen rallied as traders sought out havens. Gold climbed to a one-month high, while Treasuries held gains.

Uneasiness in markets mounted after an ABC News/Washington Post tracking poll placed Trump one percentage point ahead of Clinton. The news fueled anxiety already sparked by last Friday’s announcement that the FBI reopened its investigation into Clinton’s use of an unauthorized e-mail server. A Bank of America Corp. index tracking volatility expectations in equities, bonds, currencies and commodities rose for five straight days through Monday, the longest run of increases since before the British vote to quit the European Union.

“The latest information has put the election into question -- before that, it looked like Mrs. Clinton would win,” said Charles Comiskey, head of Treasury trading in New York at Bank of Nova Scotia. While he still doubts Trump will win, “there are a lot of question marks out there, and as it becomes more unclear as we go into next Tuesday, the market is going to be less liquid and it’s going to be more volatile,” he said.

The Democratic candidate had maintained a consistent lead over Trump prior to the FBI’s statement. Her odds of victory have fallen to 71.8 percent, according to poll aggregator FiveThirtyEight, from 81.6 percent last week.

Stocks

MSCI’s All Country World Index fell 0.4 percent as of 4 p.m. in New York, following on from its biggest monthly slide since January.

The S&P 500 Index dropped 0.7 percent Tuesday to 2,111.72, falling for a sixth day. The Chicago Board Options Exchange Volatility Index surged 8.8 percent to the highest level since June. Pfizer Inc. slipped after its profit trailed analysts’ estimates, while Archer-Daniels-Midland Co. rose after the company, which is the world’s largest corn processor, posted better-than-expected earnings.

“This unbelievable election season we’re going through isn’t exactly engendering confidence,” said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion. “There’s more uncertainty as nervousness reaches a crescendo in the final days. Earnings season is basically over, and while it was a pretty good one, there’s nothing out there to trigger an up move.”

The Stoxx Europe 600 Index fell for a seventh day, losing 1.1 percent on disappointing results from Standard Chartered Plc and BP Plc. Royal Dutch Shell Plc rose after its adjusted profit beat forecasts. The MSCI Emerging Markets Index retreated 0.3 percent after capping a five-month rally on Monday.

Futures on Asian stock indexes foreshadowed losses, with contracts on Japan’s Nikkei 225 Stock Average down at least 0.9 percent in Osaka and Chicago. Futures on equity measures in Australia, South Korea and Hong Kong dropped at least 0.6 percent.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the U.S. currency against 10 major peers, fell 0.3 percent. The greenback dropped 0.7 percent to $1.1055 per euro, while sliding at least 0.6 percent against the yen and the franc.

“The market is pricing a higher political risk premium into the dollar following the FBI probe announcement on Friday,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Before then the market had pretty much priced out most of the risk of Donald Trump becoming president. Obviously, the markets had to reassess that view now.”

A Trump victory would reduce the odds of a Federal Reserve interest-rate increase this year, stalling a two-month rebound in the dollar, Hardman said.

Mexico’s peso weakened 1.8 percent, the most since July on a closing basis. Trump has said he would revisit the North American Free Trade Agreement that governs commerce between the two countries, and also indicated he favors building a wall between the U.S. and Mexico.

Bonds

Ten-year Treasury yields were little changed at 1.83 percent, according to Bloomberg Bond Trader data. They touched 1.88 percent earlier in the session, the highest level since May 31, after data from China to the U.S. eased concern over a global economic slowdown.

Government bonds tumbled last month as investors reconsidered how much longer central banks in advanced economies will maintain exceptional monetary policy amid signs global inflation is accelerating. The market-based probability of a Fed rate hike by its December meeting is 68 percent.

Spain’s sovereign debt led declines in Europe, while those in the U.K. earlier approached their highest level since the nation voted to leave the European Union in June. Yields on similar-maturity German bunds increased two basis points, or 0.02 percentage point, to 0.19 percent.

Commodities

Gold gained for a fourth day, rising 0.9 percent as the dollar extended its retreat from a seven-month high.

Oil slipped as speculation that U.S. crude stockpiles increased last week outweighed the impact of a fuel pipeline blast. West Texas Intermediate for December delivery fell 0.4 percent to $46.67 a barrel on the New York Mercantile Exchange, as Brent for January settlement slid 1 percent to $48.14 a barrel in London.

December gasoline futures jumped 4.6 percent to close at $1.4841 a gallon after climbing as much as 15 percent in early trading.

Copper climbed for a seventh day, its longest rising stretch in almost 18 months.

— With assistance by Eddie Van Der Walt, Rebecca Spalding, Tatiana Darie, Marianna Duarte De Aragao, Netty Idayu Ismail, Lukanyo Mnyanda, Richard Frost, Paul Dobson, Emma O'Brien, Lilian Karunungan, James Regan, Alan Soughley, Susanne Barton, Kana Nishizawa, Anna-Louise Jackson, Cecile Vannucci, Stephen Kirkland, and Joseph Ciolli

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